Endowment cash in

[HappyDaysToCome]

I took out an endowment for my first mortgage many years ago. I’ve since moved many times and have a much bigger mortgage, but when it matures it will make a big dent in the mortgage and we’ll be mortgage free a couple of years later.

Anyway I’ve now got a letter saying it’s reached the original target and been moved to a low risk fund, with forms to surrender if wanted. It’s got under 3 years left to mature. I need to double check the tax status as I thought early surrender made it non-qualifying and taxable gain, but re-reading the rules I think it might be ok.

I wonder what other people would do in this situation/ what would impact on decisions. Choices are:

1. leave it in the low risk fund, carry on paying monthly premiums. Would likely get a small extra gain.

1. surrender and pay towards mortgage, reducing the term. Can’t pay it all over immediately due to fixed term but can pay some now and rest in about a years time.

1. transfer it back to a higher risk/return fund. Potential bigger gain on maturity, potential loss in value. This is no different to my situation before I got the letter, but now it feels wrong to risk it.

1. Cash it in and invest elsewhere, given low mortgage interest rate. Or possibly put into pension (over a couple of years).

We’re financially ok at the moment. DH is 50. Pensions are a bit on the low side. DC late primary.

I am sure Martin Lewis would advocate clearing the mortgage and the amount you normally pay to it can go to top up pensions instead.

@Manzanilla55

I am sure Martin Lewis would advocate clearing the mortgage and the amount you normally pay to it can go to top up pensions instead.

I agree with this. The rate of interest you are paying on your mortgage would, of course, be a significant factor.

Yes that’s what we’re going to do. I thought DH would try to persuade me otherwise, especially given we can’t put it all against the mortgage yet.

Mortgage interest is very low, which was a factor in my indecision. But I’m glad it will be finished, really bugged me paying both the endowment premium and a repayment mortgage.

I'm not too sure of the tax implications on the first option, I'm sure if you keep the fund with them you have to pay tax and fees etc

If you cash it in they'll be no tax to pay

I recently got one too and paid mortgage off 10% saved the rest to do the same next year and so on.

@Tangledtresses

I'm not too sure of the tax implications on the first option, I'm sure if you keep the fund with them you have to pay tax and fees etc

If you cash it in they'll be no tax to pay

I recently got one too and paid mortgage off 10% saved the rest to do the same next year and so on.

It’s got 3 years to maturity date, so I’m not sure if it turns it non-qualifying if I keep it to maturity date when it’s already reached the target amount. In any case I can cash it in ‘early’ and not pay tax as long as it’s more than 10 years through or 3/4 if way through, and ok on that front, and that’s what I’ll be doing.